Taiwan Opens 100 Industries to Chinese Investment

Taiwan will allow investment from mainland China in 100 industries and projects, helping the island’s economy to benefit from the warmest cross-strait relations in 60 years.

Taiwan will open up 64 sectors in manufacturing, 25 in services and 11 public infrastructure projects from today, the Ministry of Economics Affairs told a briefing in Taipei. Foundries and the liquid-crystal-display and telecommunications industries will remain closed, the ministry said.

Tensions between Taiwan and China eased after Taiwanese President Ma Ying-jeou abandoned his predecessor’s pro- independence stance. The island’s benchmark stock index rose 23.4 percent this quarter on speculation that closer ties will aid the economy which contracted by a record in the first three months of the year.

“This is another major step toward an improving relationship between Taiwan and China,” said Kevin Lin, who helps manage NT$1.5 billion ($46 million) at Taishin Securities Investment Trust Co. in Taipei. “The normalization between the two sides will help boost the local economy and corporate earnings in the long run, and thus increase the valuation of local stocks.”

The benchmark Taiex index climbed by the most since 2001 in the three months to June 30, and Taiwan’s dollar rose 3.4 percent against the U.S. currency in the same period.

Telecom Ban

China and Taiwan, ruled separately after a civil war 60 years ago, have already agreed to double weekly flights and lift restrictions on investment in banks.

A plan by China Mobile Ltd., the mainland’s biggest phone company, to buy a 12 percent stake in Taiwan’s Far EasTone Telecommunications Co. won’t be allowed under the rules announced today, Fan Liang-tung, executive secretary of the economics ministry’s investment committee told the briefing.

“I am not saying it will never happen and I don’t know when it will go through,” Fan said. “When we consider whether to open the telecom industry to Chinese investors, we will consider it on an industrywide basis, we won’t consider it from the perspective of one company.”

China Mobile’s views on the deal, which was announced on April 29, haven’t changed and the company still hopes to complete the planned acquisition, the carrier said in a statement sent via mobile phone text message. Alison Kao, spokeswoman for Taipei- based Far EasTone, declined to comment.

Real Estate

“We hope the opening up will help our economy prosper and add jobs,” Deputy Economic Affairs Minister John Deng told reporters at today’s briefing. “Taiwanese companies have invested in China since 1991 and helped grow the economy there, it’s time we opened to them.”

Taiwanese companies have invested over $77.1 billion in on the mainland since the government allowed local companies to invest in the mainland, the ministry said. The Mainland Affairs Council estimates the scale of investment at between $150 billion and $200 billion.

Under the rules announced today, Chinese companies will be allowed to buy real estate in Taiwan, including commercial property and residential homes, Fan said. Chinese individuals have been able to buy real estate on the island since 2002, according to the ministry.

Employment Boost

“The easing policy will help boost confidence of both foreign and domestic investors although the opening up will be gradual,” Ma Tieying, an economist at DBS Group Holdings Ltd. in Singapore, said. “China investors like high-technology, brand names and getting management know-how. Allowing Chinese investment will help boost demand and employment in Taiwan and help to boost the real economy in the medium to long term.”

Taiwan’s economy contracted by an unprecedented 10.24 percent in the first quarter. The island’s jobless rate climbed to a record 5.84 percent in May, the government said last week.

Investors from the mainland will gain access to industries including automobiles, plastics, textiles, personal computers and handset manufacturing, the ministry said in a statement issued after the markets closed today.

Chinese investment will also be allowed in airports and harbor facilities, limited to below 50 percent of any venture, according to the ministry. Mainland companies can also set up branches and offices on the island.

In the energy industry, Chinese companies will be allowed to invest in oil and natural gas exploration services, petroleum products wholesaling, and fuel retailing, the ministry said.

Mainland Services

Taiwanese financial institutions can now offer Taiwan-dollar services to mainland individuals and companies, the Financial Supervisory Commission said in a statement its Web site today. Lenders can also extend foreign-currency loans to branches and subsidiaries of mainland Chinese companies in Taiwan upon regulatory approval.

Chinese businessmen and individuals who own real estate in Taiwan will be allowed to visit the island independently and stay for as long as 4 months each year, Taiwan’s immigration agency said in a separate statement on its Web site today. Previously, they were obliged to travel in a group with a maximum stay of 14 days per visit.

Source from Bloomberg